Half USA & Half UK Income Tax Returns

Hello folks,

I am delighted I found this forum!

My wife and I moved from the USA to the UK in June 2016.  She is a US citizen from birth & I naturalized in November 2016 (flew back to complete the process), after living there for 4 years.

Therefore in 2016 we spent 6 months living and working in the USA (both of us) ... and then we have been living in the UK for the final 6 months of the year (in which I was the only one of us working).

Obviously tax season is upon us and I have no idea how to go about my tax returns. Do my wife and I file one report showing combined USA & UK income? Or do I file my normal US tax return by April 15th (showing USA income) - then file my overseas tax return by June 15th?

I have toyed with the idea of using one of those companies like www.taxesforexpats.com (do you know anyone that has ever had any experience with them?) - or I know that Price Water Coopers in the city centre here in Belfast, have a person that deals with US tax returns. I know they will charge more than your average accountant, so I am not sure what to do.

My accountant in San Diego (where we were living) said that he could do it for me - but I honestly am not sure he knows enough about it (even though he says he does). I would like someone with a detailed understanding of pensions, FBAR etc

On another forum a user also told me this - Since you moved to Belfast in June 2016, you are a few months too early to file your US return for 2016 as you do not have a 330 day qualifying period outside of the United States. Your US return will report worldwide income and gains. ... so does this mean that I just have to file a regular 1040 by April 15th, reporting US income and UK income?

Just curious if anyone has any pointers / can advise me which direction to look in? Should I use one of the companies mentioned above? Or my regular accountant back in San Diego?

Thanks!

You'll want to file a US extension so you can get to 330 days outside the US so you qualify for ACA exemption and FEIE.

For US taxes you'll just file a 1040, for UK taxes you'll file a self assessment if you have foreign income over the limits.

You'll want to file a US extension so you can get to 330 days outside the US so you qualify for ACA exemption and FEIE.

For US taxes you'll just file a 1040, for UK taxes you'll file a self assessment if you have foreign income over the limits.

Thank you so much nun!  Seeing as this is genuinely all new to me - just a few quick follow ups ...

1) How do I file for an extension? (is it easy)?

2) What is an ACA excemption?

3) What is FEIE?

4) Should I use someone like Taxes for Expats? Bright!Tax etc?

I lived in the US for 4 years and my taxes there were relatively straightforward (a local accountant did them for me) - so I am trying to learn as I go.

Thank you, much appreciated - I have been stressing out about the whole thing for the last few weeks!

Thank you so much nun!  Seeing as this is genuinely all new to me - just a few quick follow ups ...

1) How do I file for an extension? (is it easy)?

2) What is an ACA excemption?

3) What is FEIE?

4) Should I use someone like Taxes for Expats? Bright!Tax etc?

I lived in the US for 4 years and my taxes there were relatively straightforward (a local accountant did them for me) - so I am trying to learn as I go.

Thank you, much appreciated - I have been stressing out about the whole thing for the last few weeks!

Just type your questions into Google and you'll get the answers.....here is a link that is te result of typing question 1) into google

https://www.irs.gov/pub/irs-pdf/f2350.pdf

In terms of selecting any US tax adviser, as there are no legal requirements to have passed any exams before offering tax advice, the IRS offers a very helpful Directory which lists the only individuals who are qualified to advise on US tax matters; and which can be found here:
http://irs.treasury.gov/rpo/rpo.jsf . I would always recommend that someone in your situation only selects an adviser from those who are qualified to advise on US tax matters and whose names are therefore published by the IRS. The IRS list is I think an excellent tool that is designed to help check if any adviser or proposed adviser has any tax credentials within the United States.

Most UK based individuals will naturally also want to check that any proposed tax adviser is qualified with at least one professional accounting or tax institution in the UK as well as in the United States so that they know that the adviser is also adequately regulated in the UK.

Just type your questions into Google and you'll get the answers.....here is a link that is te result of typing question 1) into google

https://www.irs.gov/pub/irs-pdf/f2350.pdf

Thank you!

One final question - you had mentioned that an extension would mean that I would then be out of the USA for the required 330 days in order to qualify for certain exemptions...

As the US tax year runs from Jan - Dec (so that will be the months that I am filing for), should I not have been outside the USA for 330 days in the calendar year of 2016, in order to qualify for those exemptions that you mentioned? The likes of ACA etc

Or is it OK that for my 2016 tax return, my 330 days outside of the USA will be half of 2016 and part of 2017?

Thank you!

In terms of selecting any US tax adviser, as there are no legal requirements to have passed any exams before offering tax advice, the IRS offers a very helpful Directory which lists the only individuals who are qualified to advise on US tax matters; and which can be found here:
http://irs.treasury.gov/rpo/rpo.jsf . I would always recommend that someone in your situation only selects an adviser from those who are qualified to advise on US tax matters and whose names are therefore published by the IRS. The IRS list is I think an excellent tool that is designed to help check if any adviser or proposed adviser has any tax credentials within the United States.

Most UK based individuals will naturally also want to check that any proposed tax adviser is qualified with at least one professional accounting or tax institution in the UK as well as in the United States so that they know that the adviser is also adequately regulated in the UK.

Thank you for the list!

I just checked and Taxes for Expats are a member of the NAEA - an organisation listed on the IRS website.

I have emailed both Taxes for Expats and Bright!Tax to get a quote etc.

My taxes should be relatively straight forward for these companies, but because this is my first tax return as an expat - I would rather it be done right.  Rather than having to correct anything in the future.

Most UK based individuals who do not feel confident handling their own tax returns will want to check that any proposed tax adviser is qualified with at least one professional accounting or tax professional body in the UK as well as in the United States so that they know that the adviser is adequately regulated in the UK and handles every day many of the complexities of the foreign aspects of the United States tax system.  Indeed, more broadly, for most UK based individuals there are often considerable advantages in having a UK based adviser who can jointly advise on both US and UK tax issues and (possibly) handle both sets of tax returns in the UK.

These include:
1.   The client and the adviser being located in the same time zone.
2.   Client documents and workpapers being held outside of the United States; which many people perceive as providing additional protection in the event of IRS audits.
3.   Advisers outside of the UK are unable to offer the protections to clients provided by the UKs Proceeds of Crime Act, which requires all tax professionals offering services in the UK to be regulated and supervised for anti-money laundering protection purposes.  Here in the UK it is a criminal offence to offer tax advice unless the adviser is supervised. Quite unlike within the UK, there is no requirement for mandatory regulation of tax advisers in most of the United States. 
4.   The fact that although there are roughly one million paid tax professionals within the United States, that there are naturally only very few amongst these who understand enough about the US reporting of foreign based taxpayers.
5.   Most tax advisers outside of the UK are not bound by the UK ethical standards that govern UK qualified advisers; which set out fundamental principles of integrity, objectivity, competence and care, confidentiality and behaviour (http://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation).
6.   The opportunity in the unlikely event that things ever go wrong to get issues addressed through a supervisory body that is closer to the client than an adviser located several thousand miles away.

Most UK based individuals who do not feel confident handling their own tax returns will want to check that any proposed tax adviser is qualified with at least one professional accounting or tax professional body in the UK as well as in the United States so that they know that the adviser is adequately regulated in the UK and handles every day many of the complexities of the foreign aspects of the United States tax system.  Indeed, more broadly, for most UK based individuals there are often considerable advantages in having a UK based adviser who can jointly advise on both US and UK tax issues and (possibly) handle both sets of tax returns in the UK.

These include:
1.   The client and the adviser being located in the same time zone.
2.   Client documents and workpapers being held outside of the United States; which many people perceive as providing additional protection in the event of IRS audits.
3.   Advisers outside of the UK are unable to offer the protections to clients provided by the UKs Proceeds of Crime Act, which requires all tax professionals offering services in the UK to be regulated and supervised for anti-money laundering protection purposes.  Here in the UK it is a criminal offence to offer tax advice unless the adviser is supervised. Quite unlike within the UK, there is no requirement for mandatory regulation of tax advisers in most of the United States. 
4.   The fact that although there are roughly one million paid tax professionals within the United States, that there are naturally only very few amongst these who understand enough about the US reporting of foreign based taxpayers.
5.   Most tax advisers outside of the UK are not bound by the UK ethical standards that govern UK qualified advisers; which set out fundamental principles of integrity, objectivity, competence and care, confidentiality and behaviour (http://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation).
6.   The opportunity in the unlikely event that things ever go wrong to get issues addressed through a supervisory body that is closer to the client than an adviser located several thousand miles away.

Thank you Guya!

My fear of using a UK based tax professional is fear that they do not fully understand the complexities of US tax returns for overseas citizens.  Especially considering that my wife and I have moved from California, which is a notoriously difficult state to leave (tax wise).  So I am fearful that a UK based company may be able to help with a federal return, but not fully able to help correctly with a state return.

I am going to see if I can contact one of the London based companies listed on the IRS approved list to see what their prices are like.

Both taxes for expats and Bright!Tax have emailed be back with a price quote and detailed what I get for my money.

I still haven't decided who to go with, but I am 100% sure that I want someone fully qualified in filing a US tax returns for citizens based in the UK.

Just curious if you advise against using either of those two companies that I mentioned? (at this time I haven't contacted a UK based company)

Thanks!
 

Here in the UK it is a criminal offence to offer tax advice unless the adviser is supervised. You will want to check with any possible adviser who is their supervisor for the purposes of UK anti-money laundering rules. It is likely to be a professional body.

There are many excellent dual US/UK qualified tax advisers in the UK; who will understand how one optimises between US and UK tax rules to one's best advantage.

All of the UK based US tax advisers I know and meet frequently and will happily assist with State income tax return preparation.

Here in the UK it is a criminal offence to offer tax advice unless the adviser is supervised. You will want to check with any possible adviser who is their supervisor for the purposes of UK anti-money laundering rules. It is likely to be a professional body.

There are many excellent dual US/UK qualified tax advisers in the UK; who will understand how one optimises between US and UK tax rules to one's best advantage.

All of the UK based US tax advisers I know and meet frequently and will happily assist with State income tax return preparation.

Thank you Guya,

I found on the IRS directory that was posted, that there is an Enrolled Agent here in Belfast - I just have to figure out a way to get in touch with him.

Would you personally recommend anyone in particular?

Simply being an EA is not enough by itself.

Golden Rules for choosing a tax preparer:
1. QUALIFICATIONS
Do not be shy! Ask if they are members of professional bodies in both the US and UK and if so, which ones and for how long.
2. COST
Ask what they charge!
3. COMFORT
Pick one who is dual US/UK qualified (so you know that the tax preparer is regulated in both the US and the UK) and who you feel you can get on with. This is personal choice so call a few firms before deciding...

Simply being an EA is not enough by itself.

Golden Rules for choosing a tax preparer:
1. QUALIFICATIONS
Do not be shy! Ask if they are members of professional bodies in both the US and UK and if so, which ones and for how long.
2. COST
Ask what they charge!
3. COMFORT
Pick one who is dual US/UK qualified (so you know that the tax preparer is regulated in both the US and the UK) and who you feel you can get on with. This is personal choice so call a few firms before deciding...

Thank you Guya,

That is incredibly helpful and are things which I genuinely would not have thought about.  I found this company via a quick search online:

http://www.americanuktaxsolutions.com/

Based in the UK and on the "about us" section - lists all of his qualifications/previous jobs and confirms that he is also an enrolled agent with the IRS.

Just curious if you have ever came across this company/dealt with them?

Cheers (for everything)!

Thank you!

One final question - you had mentioned that an extension would mean that I would then be out of the USA for the required 330 days in order to qualify for certain exemptions...

As the US tax year runs from Jan - Dec (so that will be the months that I am filing for), should I not have been outside the USA for 330 days in the calendar year of 2016, in order to qualify for those exemptions that you mentioned? The likes of ACA etc

Or is it OK that for my 2016 tax return, my 330 days outside of the USA will be half of 2016 and part of 2017?

Thank you!

From my understanding it can be any consecutive 12 months, it doesn't have to be Jan - Dec.

We use Bright!Tax, and they are great.

Good luck!